"Chicago and New York rank at the bottom of a new analysis of fiscal strength based primarily on data from 2015 financial reports issued by the cities themselves.
Chicago’s position at the bottom of the ranking is no surprise to anyone who follows municipal finance.
The Windy City has become a poster child for financial mismanagement, having suffered a series of ratings downgrades in recent years.
Aside from having thin reserves and large volumes of outstanding debt, Chicago is notorious for its underfunded pension plans.
For example, the city’s Municipal Employees' Annuity and Benefit Fund (MEABF) reported $4.7 billion in assets and $14.7 billion of actuarially accrued liabilities at the end of 2015, representing a funded ratio of just 33 percent.
The actuarial calculations rely on a controversial practice of discounting future benefits at a rate of 7.5 percent, which is the assumed return on the fund’s portfolio return.
If a more conservative assumption was employed, MEABF’s liabilities would be higher and its funded ratio lower.
Related: See the Full 2017 Fiscal Strength Index Ranking of 116 US Cities..."
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